Getting paid is part of the job: a better debtor process for construction businesses

If you finish $100,000 of work and let the customer take another 30, 60 or 90 days to pay, you are effectively funding that customer.

Meanwhile you may already have paid:

• employees
• subcontractors
• materials
• fuel
• equipment
• insurance
• rent
• GST
• PAYGW
• super

That gap has to be funded somehow.

Usually it comes from:

• cash already in the business
• an overdraft
• another loan
• delaying your own suppliers
• delaying tax
• the owner's personal money

None of those should be the default way you finance a customer's slow payment.

The longer the debtor sits there, the greater the risk that it becomes something more than a timing problem.

ASIC's latest annual insolvency figures show construction accounted for 24.5% of companies entering external administration for the first time during 2025–26.

That makes debtor management particularly important in this industry. It is a big part of what we look at with construction businesses on the Gold Coast.

You do not need to assume every customer is going broke.

You do need to stop assuming every invoice will eventually look after itself.

One of the biggest mistakes I see is treating debtor collection as something that starts once an invoice becomes overdue.

It starts much earlier.

Before taking on a significant job, you should understand:

• who you are actually contracting with
• who is responsible for paying you
• the payment terms
• when you are entitled to claim
• who needs to approve the invoice or progress claim
• whether a purchase order is required
• what documents need to accompany the claim
• how variations are approved
• whether retentions apply
• what happens if there is a dispute

If you do not know those things at the beginning, you usually find out when the payment is already late.

That is the worst time to discover that an invoice went to the wrong entity or that the accounts team was waiting on a purchase order you were never given.

This is particularly important when taking on larger jobs.

A new customer asking for 30-day terms is effectively asking you for credit.

Treat it that way.

For material jobs, consider checking:

• the correct legal entity
• ABN
• company details
• trading history
• previous dealings
• references where appropriate
• publicly available payment information
• commercial credit information where warranted

If you are supplying a large business, the Australian Government's Payment Times Reports Register can also provide information on how reporting entities pay their small business suppliers. The scheme requires large businesses and some government enterprises to report their payment terms and actual payment times.

You do not need a forensic investigation for every $800 job.

The level of checking should match the amount of money you are putting at risk.

Your customer should not first discover your payment terms at the bottom of the invoice.

For larger work, those terms should be agreed as part of the contract or engagement.

That includes things such as:

• deposit
• progress payments
• milestone payments
• final payment
• payment period
• variations
• retentions where relevant

The bigger the job, the more important this becomes.

A $200,000 job billed entirely at the end creates a very different cash-flow exposure from one that is properly claimed in stages as the work progresses.

Do not automatically fund the whole project yourself if the commercial arrangement does not require you to.

There is often unnecessary delay between:

“the work is ready to be invoiced”

and:

“the invoice actually goes out.”

Three days here.

Another week because the owner was busy.

Then somebody needs to check the variation.

Then accounts only sends invoices on Fridays.

The customer cannot pay an invoice they have not received.

If the work is complete and you are entitled to claim, get the invoice or payment claim out.

For businesses issuing a lot of invoices, this needs to be a process rather than relying on the owner remembering.

Someone needs to own it.

That may be:

• the owner
• project manager
• administrator
• accounts person
• external bookkeeper

The important thing is that somebody is responsible.

For Queensland construction work, there are specific payment protections under the Building Industry Fairness (Security of Payment) Act 2017.

QBCC guidance says a payment claim needs to identify the relevant work or goods and services, state the amount being claimed and request payment. A normal tax invoice can potentially perform that role if it contains the required information.

The contract also matters.

Reference dates determine when payment claims can be submitted, and there are time limits around certain claims.

Under Queensland's rules, if a contract does not specify a due date, the default due date for a progress payment is generally 10 business days after the payment claim is given. There are also maximum payment terms for certain construction contracts.

If you are relying on security-of-payment rights, get advice early.

The deadlines for payment schedules, adjudication and other steps can matter, and they are not something I would leave until an account has been sitting there for three months.

Other states have their own security-of-payment regimes, so businesses operating outside Queensland should check the rules that apply to them.

Variations cause a lot of debtor problems.

The work happens.

Everyone agrees verbally that it needs to be done.

The team completes it.

Then six weeks later the invoice arrives and somebody asks:

“Who approved this?”

That conversation is much harder after the work is finished.

Have a process.

Where possible:

• document the variation
• explain the cost
• obtain approval
• keep the evidence
• include it in the appropriate claim

The system does not need to be complicated.

It just needs to happen consistently.

Every construction business carrying debtors should have an aged receivables report.

At a minimum, you should know:

• total debtors
• not yet due
• overdue
• 30+ days
• 60+ days
• 90+ days
• biggest individual exposures

Do not only look at the total.

A business with $400,000 of debtors can be in a very different position depending on whether:

• $350,000 is current

or:

• $250,000 is more than 60 days overdue.

I also want to know who owes the money.

If half the debtor book belongs to one customer, that concentration matters.

This is where a lot of businesses fall over.

Everyone knows that invoices need chasing.

Nobody actually owns it.

The owner thinks admin is doing it.

Admin assumes the project manager is speaking to the customer.

The project manager does not want to talk about money.

Another week passes.

There should be one person responsible for maintaining the debtor list and making sure every overdue account has an action against it.

For example:

You should not decide what to do with an overdue invoice every time one occurs.

Set the process beforehand.

The exact timing will depend on your contracts and customers, but it might look something like this.

Make sure:

• invoice was received
• required documents were attached
• there are no queries
• invoice is approved for payment

For material invoices, a quick call before the due date can prevent a lot of problems.

Send the reminder.

If the amount is significant, call.

Ask directly:

“Is there anything preventing this invoice from being paid?”

That question is much better than:

“Just checking whether you've seen the invoice.”

Get a specific commitment.

Not:

“We'll get onto it soon.”

Ask:

“What date will the payment be made?”

Record it.

Then follow up on that date.

Escalate it.

The owner or senior person in your business may need to speak to the customer.

You may also need to consider:

• whether further work should continue
• whether more credit should be extended
• whether formal recovery steps are appropriate
• whether security-of-payment rights are available

Do not stop work or take contractual action without understanding the contract and obtaining legal advice where required.

But equally, do not keep increasing the amount owed because you are uncomfortable having the conversation.

An invoice can be unpaid for two very different reasons.

The customer accepts the invoice but has not paid it.

That is a collection problem.

The customer disputes:

• the work
• variation
• amount
• quality
• scope
• completion

That is a dispute.

Treat them differently.

If there is a genuine dispute, get somebody responsible for the project to deal with it immediately.

Do not let the accounts person send the same automated reminder every seven days while the customer is waiting on the project manager to answer a question.

Resolve the issue.

Then collect the money.

Your accounting system should be doing some of the repetitive work.

Depending on your setup, consider:

• automatic invoice reminders
• statements
• payment links
• scheduled invoices
• recurring invoices
• direct debit for appropriate recurring customers

Automation is useful for routine follow-up.

But it should not replace judgement.

A $120 invoice that is three days late might need an automatic email.

A $75,000 progress claim that is two weeks overdue probably deserves a phone call.

Every invoice should make payment straightforward.

Use:

• clear bank details
• payment reference
• payment link where appropriate
• contact details for invoice questions

Do not make somebody email you to ask:

“What account do I pay this into?”

The fewer steps between receiving the invoice and making payment, the better.

This is one of the biggest changes I would make in businesses with debtor problems.

Too often the process is:

Invoice issued.

Nothing.

Reminder.

Nothing.

Reminder.

Nothing.

Then at 60 days the owner gets angry and starts calling.

By that point you may have completed another $50,000 of work for the same customer.

The purpose of a good debtor process is not to become aggressive.

It is to identify payment problems early.

If somebody normally pays in 14 days and suddenly goes to 30, ask what has changed.

If they break a payment promise, follow it up.

If their accounts team says there is a problem, find out what it is.

Early information gives you more options.

This is the uncomfortable part.

A customer owing you $20,000 who gives you another $20,000 of work can feel like a good thing.

But if the first $20,000 is already overdue, you need to think carefully about whether you are increasing the problem.

More revenue is not helpful if you do not collect the cash.

Before continuing substantial work for an overdue customer, understand:

• why payment is late
• what amount is outstanding
• what additional exposure you are taking
• whether the customer has honoured previous promises
• what your contract allows
• whether there is a genuine dispute

Sometimes the right commercial decision is still to continue.

But make it consciously.

This is another pattern we see.

Customers pay slowly.

Cash gets tight.

The business still pays:

• wages
• suppliers
• subcontractors

Then it doesn't pay:

• BAS
• PAYGW
• super
• income tax

That may solve today's problem.

It creates another one.

ATO debt can grow quickly once a business starts using tax obligations to fund working capital.

If slow debtors are causing tax arrears, the real problem needs attention.

The business needs a debtor strategy, not just another ATO payment plan. If tax arrears have already built up, talk to us about tax and accounting before the position gets harder to fix.

A construction business can report a healthy profit and still have very little cash.

Debtors are one reason.

If the P&L says you have made $500,000 but $400,000 is sitting in unpaid invoices, the business does not have $500,000 available to spend.

That money still has to be collected.

This is why we spend so much time talking to clients about the difference between:

Profit

and:

Cash.

The sale is not finished from a cash-flow perspective until the money arrives.

If I was reviewing a construction or trade business with debtor problems, I would want to see something close to this:

• correct customer/entity
• written terms
• clear payment terms
• credit checking appropriate to the exposure
• variation process
• progress-claim process

• variations documented
• progress claims issued on time
• customer queries dealt with quickly
• upcoming claims prepared before the claim date

• invoice/claim issued promptly
• correct entity
• correct contact
• PO/reference included
• supporting information attached
• easy payment method

• aged debtor report reviewed
• largest exposures reviewed
• overdue accounts assigned
• disputes separated from collection issues
• promised payment dates recorded
• overdue customers followed up

• senior escalation
• decision about further credit/work
• payment plan if commercially appropriate
• legal/security-of-payment advice where required
• formal recovery action when necessary

None of that is particularly complicated.

The value comes from doing it every time.

Construction businesses spend a huge amount of effort on:

• quoting
• scheduling
• labour
• materials
• job management
• getting the work done

Debtor collection sometimes gets whatever time is left over.

I think that is backwards.

If you quote the job, supply the labour, buy the materials, complete the work and send the invoice but never collect the money, the business has not achieved very much.

The job is not commercially complete when the tools go back in the ute.

It is complete when the business gets paid.

In the current environment, I would be looking very closely at:

• how quickly invoices go out
• how long customers actually take to pay
• who owns debtor collection
• which customers are repeatedly late
• how much credit the business is extending
• whether overdue debtors are starting to create pressure elsewhere

You do not need to become aggressive with good customers.

You do need a system. If you want help setting one up around your numbers, that is the kind of work we do in Business Advisory.

And the earlier that system identifies a problem, the better chance you have of dealing with it before a late invoice becomes a bad debt.

For Queensland construction work, payment claims and payment disputes can be subject to the Building Industry Fairness (Security of Payment) Act 2017.

QBCC provides guidance on:

• payment claims
• reference dates
• payment schedules
• due dates
• adjudication
• other payment protections

These processes can involve strict timeframes. If a material construction payment becomes disputed or remains unpaid, obtain appropriate legal or QBCC guidance promptly rather than waiting until months have passed.